Now that the pandemic is officially over, can I still deduct the cost of masks and hand sanitizer for my classroom or place of business?
Let’s first start by defining you. Are you an individual? Or are you a business owner? We will discuss the deductibility of PPE for an individual or teacher. Then, we will discuss the deductibility of PPE for self-employed or employers.
Although President Biden and Congress (via the H.R.382 - Pandemic is Over Act) have stated that the pandemic and its related relief benefits ended on May 11, 2023, there is little advice on the continuing deductibility of PPE.
The availability of the deduction is as follows:
For Teachers - COVID TAX RELIEF ACT
§275 of the COVID Tax Relief Act, an eligible educator may treat unreimbursed expenses paid or incurred after March 12, 2020, for COVID-19 Protective Items that are, or will be, used by that eligible educator for the prevention of the spread of COVID-19 in the classroom, as expenses that are described in §62(a)(2)(D)(ii) and allowable as a deduction under §62(a)(2)(D), subject to the aggregate dollar limitation provided in such provision. For purposes of this revenue procedure, COVID-19 Protective Items include, but are not limited to: face masks; disinfectant for use against COVID-19; hand soap; hand sanitizer; disposable gloves; tape, paint or chalk used to guide social distancing; physical barriers (for example, clear plexiglass); air purifiers; and other items recommended by the Centers for Disease Control and Prevention (CDC) to be used for the prevention of the spread of COVID-19.
What does this mean? Teachers and related personnel in schools for elementary and secondary education can deduct the necessary PPE up to the eligible educator deduction limit of $250 per person. If questioned, you need to have receipts and proof that you paid for it during the tax year. In addition, you should include the reasoning or the ongoing need for the use of PPE.
For Other Individuals – TAXPAYER CERTAINTY AND DISASTER TAX RELIEF ACT OF 2020
The IRS has announced that amounts paid for personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of the Coronavirus Disease 2019 (COVID-19 PPE) are treated as amounts paid for medical care. Therefore, amounts paid by an individual taxpayer for COVID-19 PPE for use by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent(s) that are not compensated for by insurance or otherwise are deductible as medical expenses and are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs).
What this means is that you can still deduct the cost of PPE that you or your family uses as a medical expense deduction on Form 1040, Schedule A, subject to the 7.5% AGI floor. Of course, you cannot deduct it if your health insurance reimbursed you for the PPE or if you used your HSA/FSA account to pay for the PPE. In addition to keeping the receipts for the PPE purchased, you should include the reasoning or the ongoing need for the use of PPE.
Self-employed or Businesses - IRC §162 REGULATIONS COVERING TRADE OR BUSINESS EXPENSES.
In short, the IRS Code says:
- Taxpayers can deduct business expenses if they are ordinary, necessary, and reasonable.
- Generally, an ordinary expense is one that is common for the particular type of business that you operate.
- Generally, a necessary expense is one that is appropriate and helpful for the development of the business.
- Expenses must generally be paid or incurred during the tax year by the taxpayer to generate a trade or business income.
What this means is that PPE used in your business can be deducted, but you need to keep detailed records of what and why.
Let’s look at some examples:
- You’re a rideshare driver and you are still using PPE in your business. What is your reason? You’re in an enclosed space with people you do not know; they may travel a lot; and they often will not say they are sick, even if they are.
- You work in a higher-than-average exposure situation, and you need to make sure you are kept healthy so that you can continue to do your job. So, PPE precautions are a reasonable necessity for doing your job.
The bottom line is that you need to document
YOUR particular facts and circumstances. This is especially true because, in an audit, the IRS will consider your situation and not just the general situation. The final point is that you must have documentation to prove these expenses are ordinary, necessary, and reasonable, and make sure to keep the receipts and proof you paid for them.
**Note that as of this publishing in December 2023, neither the IRS, Congress nor the Treasury Department have given any advice for or against the continued deductibility of PPE.